Wednesday, February 16, 2011

Management By PESO (Political, Economic & Social Objectives)

Inherent in every human being is a management skill. The difference is how it is nurtured as the individual grows and develops to control his environment. Control is a management function that must accompany efficient and effective planning, organizing and leading if we expect excellent results.

These management functions are honed by experience, education and empirical studies coupled with a natural gift called “common sense”. Depending on your developed objectives and expected results, your performance is measured against pre-set standards.

Every human endeavor or activity, no matter how simple or complex, is managed. Whether expressed or implied, planning is a must. As simple as shopping, for example, requires listing what to buy, knowing where to go, how much should you bring or what credit card to use. Dating or managing a relationship is a little more “complicated” but organizational skills and an effective exercise of leadership through communication, inspiration and motivation would most likely do the job.

Managing the United States of America and all its inhabitants; the executive department of the government bureaucracy and its relationships with the other departments; political parties (both your own and the opposition); private sector groups that include the mainstream and social media monitoring and questioning every move; relationships with foreign governments; the defense and protection from enemies of the State that include terrorists and criminals; and of course, foreign wars, is an awesome responsibility with all its complications and risks.

I do not envy President Barack Obama. He must manage under certain controls. Limited by the Constitution, Federal laws, State and local laws, Federal regulations, judicial decisions, and the inherent rights of the sovereign citizenry, he must plan, organize and lead to achieve his objectives subject to those controls.

But he sought the job. He said, “Yes, we can.” And he could do it from “Day 1”. Commensurate with the aforementioned responsibilities are awesome powers and resources provided by the same entities that define the controls. He manages all the financial and human resources of practically every executive agency that affects every facet of American life. Every year he is called upon to report to Congress as representatives of the people the “State of the Union” at the time and also to define his plans for the next year and the near future.

We all heard his “State of the Union” speech. He plans to “out-innovate, out-educate, and out-build” the competition in the global market place. In a subsequent speech he added to “out-hustle” as an objective. Of course, reducing the debt and the deficit is a primary concern as well.

Budgeting is a unique management function.  As a rule, it is included as a control mechanism. It limits operating and capital costs and expenses. It measures achievement or performance as against set financial standards.

But it also performs planning, organizing and leading functions.  By submitting his proposed budget, President Obama defined his goals and the program steps to “out-innovate, out-educate, out-build and out-hustle the competition. He also identified the organizational structures, institutions, and steps needed. He must now lead by setting the priorities, motivate and inspire his subordinates to follow his example and together convince the sovereign people to accept the required sacrifices to “win the future”.

For the defined objectives on innovation, education, infrastructure and competition, President Obama’s budget seems to reflect them. “Put your money where your mouth is”, is the determining factor of one’s commitment.

Obama increased the budget of Education from $49.1B to $68B. That’s an increase of 38.5 %. Increases also merited the following departments: Homeland Security by 1.8%; Transportation by 68.1%; Treasury by 11.4; Veterans by 4.5%; Legislative Branch by 6.9%; and the Judiciary by 4.3%. Most of the agencies had reductions in their budgets. Defense, for example, got a budget reduced by 5.8%.

Reducing Federal spending is not enough. So Obama also proposes modest tax hikes on Wall Street, Oil Companies and the Rich. He is also instituting a five-year freeze of many domestic programs. Many of the social programs including one that deals with community organizing were cut.

The proposed Republican (GOP) budget reflects a different set of priorities. Expectedly, the focus is to reduce the deficit through decreased spending. Definitely no tax hikes and none of that “out-innovate, out-educate and out-build” stuff. The cuts run across the board. It addresses the concern that borrowing should be substantially reduced if not completely stopped. It gave the Republicans control of the House. They expect that it would give them control of the White House in a couple of years.

Borrowing is something discouraged even in every day life. During the financial crisis, I was forced to use my business credit line to cover partially our family needs. My wife was forced to learn and gained the expertise of managing her own investments. I enjoyed being relegated to  research assistant analyzing the financials of companies whose stocks she  considered  buying. Listening to Mad Money’s Jim Cramer and CNBC was also a way for her to monitor the financial market.

When the financial crisis ended and the market recovered, one of my wife’s investments was Apple stocks. She originally bought it at $140 per share. When it went up to $220, she had more than enough to pay off the money borrowed using my business credit line. Should she have paid off or at least reduce the debt?

First there was the IPOD; then, the IPHONE; the Mac Book Air; now the IPAD and more innovations coming. Is investing in innovation a risky venture? My wife did not think so. I did not think so. We still have that payable and paying a reasonably low interest rate. But the Apple stock is now $362.

My parents sent all their children to school mostly on borrowed money. They considered the costs as investments for the future. We all became successful professionals and correspondingly raised our children in the same way.

The samples are simple but no different when applied on a national scale. While the interest rates for debts could be fixed even for a longer term, the effects of innovation, education and infrastructure building are exponential and lingering.

As President, Obama is Managing By PESO (Political, Economic and Social Objectives). Hope we all win!

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